Motorola to Cut 15,000 Jobs in Restructuring
Motorola Inc. said Thursday that it will eliminate 15,000 jobs--or 10% of its work force--as part of a restructuring that will force the company to take a $1.95-billion pretax charge in the second quarter.
The Asian economic crisis and Motorola’s own missteps in the digital cellular phone market are hurting the once high-flying company, forcing it to exit underperforming businesses. The company’s troubles, which have sent shares plunging 42% since July, may cause it to report disappointing results for the third time in the last year.
“In the fourth quarter of last year, our forecast for 1998 called for higher sales growth and improved profitability, but that has not materialized,” Motorola President Robert L. Growney said. “It is clearly time to accelerate the implementation of our renewal plan.”
Motorola owns a semiconductor plant in the Irvine Spectrum industrial park. The 244,000-square-foot plant, one of the largest manufacturing facilities in that area, makes chips used in cellular phones, pagers and automotive engine controls.
Local company officials could not be reached Thursday to say how or if he corporate-wide layoffs will affect its Orange County facilities.
Motorola, which bought the plant from Western Digital Corp. in 1994, put its Irvine plant up for sale last October. There were 500 employees working at the facility at the time.
The Illinois-based electronics giant wanted to sell the plant because it was too small and too isolated from Motorola’s other chip-making centers, officials said. But the two likeliest local buyers--Western Digital and Rockwell International Corp.--were not interested in the deal.
Motorola, based in the Chicago suburb of Schaumburg, has about 150,000 employees worldwide. The labor reduction will take place over 12 months by attrition and layoffs, company spokesman David Rudd said.
Chief Executive Christopher Galvin said consolidation will take place throughout the company, with emphasis on semiconductor products and messaging, information and media segments.
“We expect improved business results from the renewal of the company’s communications equipment businesses, a process that began in April,” Galvin said.
Motorola has seen its fortunes decline dramatically since 1995, according to analyst Douglas Christopher of Crowell Weedon & Co. in Los Angeles. The company’s problems stem largely from lagging demand and the falling price paid for its semiconductors, which account for 20% of Motorola’s business.
Motorola also is being hurt by increased competition for cellular phones and equipment from Lucent Technologies, Sweden’s LM Ericsson, Finland’s Nokia and Canada’s Northern Telecom. Motorola has seen its market share in wireless systems drop from 25% to 15% in the last couple of years.
Motorola also has been hurt by a lagging transition from analog handsets to digital. The company is only in the initial stages of producing and introducing new digital handsets, far behind competitors Nokia and Ericsson.
The company made the announcement after the close of U.S. trading. On Thursday, Motorola shares gained 69 cents to close at $51.50 on the New York Stock Exchange. The stock has been trading just above its 52-week low of $50.63.
* INTEL MAY OWE: Stock price slump boosts value of “put warrants.” D2
* MARKET RALLIES: Tech issues led stocks higher, before Motorola news. D4
